Older homeowners face interest-only mortgage problems

March 25, 2016 by Brendan

Home owners

It is believed that around one million older property owners face losing their homes, as they are unable to repay the amounts outstanding on their interest-only mortgages, and the situation looks as though it may get worse.

In 2015, the Citizens Advice Bureau issued a warning that 934,000 homeowners would face problems when their mortgage term arrived, unable to pay the amount outstanding on their interest-only mortgages. Many of these mortgages come to term within the next few years, with some people facing repossession or having to sell their property. Key Retirement, a specialist in equity release, has warned that the first of the interest-only mortgages will reach maturity in just four years.

Prior to 2012, millions of people were sold mortgages based on an interest-only payment. This option made the monthly payments more affordable for many at that time, while some had endowment policies meant to cover the amount outstanding, but failed to do so. In addition to the problems faced with their mortgage, many older homeowners are also facing credit card debts, personal loans and overdrafts.

As lenders may not be keen on extending a mortgage to older borrowers, an alternative option is equity release, although this solution depends on the amount of equity in the property. The average amount owed at retirement is £34,600, while almost 20% owes £50,000 or above.

Speaking to a CeMAP trained mortgage adviser could help older homeowners to find an affordable solution, leaving them free to enjoy their retirement.